Kedma Fund Exits Multi Retail With 3x Return

Private equity firm Kedma Fund has successfully divested its controlling stake in Multi Retail, the parent company of prominent Israeli retail chains including Ace, Auto Depot, and Bateel. The transaction, valued at approximately 240 million shekels, represents a significant return for Kedma, reportedly achieving a threefold profit on its initial investment made nearly a decade ago. This exit comes despite a challenging period for Multi Retail's stock, which had seen a substantial decline from its initial public offering price.

The buyer is businessman Ronen Ganon, a key figure behind the discount retail chain Zol Stock. Ganon is acquiring approximately 70% of Multi Retail from Kedma for 168 million shekels. Additionally, Itzik Ozana, the company's CEO for the past 12 years, is selling his shares for about 5.5 million shekels, bringing the total acquisition cost for Ganon to roughly 173.5 million shekels. This deal was structured with a premium of about 60% over the company's market valuation prior to the announcement, prompting a significant surge in Multi Retail's stock on the Tel Aviv Stock Exchange.

Kedma Fund, managed by Uri Einan, Gilad Halevy, and Gilad Shavit, initially invested in the Ace network (now part of Multi Retail) in late 2016. This acquisition was a strategic move following Ace's financial difficulties and administration proceedings. The fund's investment has yielded an estimated profit of around 200 million shekels, including dividends, underscoring a successful, albeit complex, turnaround and value creation strategy.

Multi Retail operates a diverse retail portfolio encompassing home and automotive goods. Its operations are segmented into home and car improvement products under brands like Ace and Auto Depot, home design and furniture through Bateel and Urban, and an online presence via Ace Online. The company manages 54 retail locations across Israel. The retail sector in Israel has faced evolving consumer demands and economic pressures, making strategic acquisitions and divestitures crucial for sustained profitability.

The IPO of Ace in 2021, led by Kedma, initially valued the company at 400 million shekels and allowed Kedma to recoup its initial investment through a share sale. However, the subsequent years saw significant market headwinds. A major acquisition of Bateel, Urban, and IDDesign proved challenging, leading to substantial write-downs and a reported annual loss of approximately 45 million shekels for Multi Retail. Kedma was compelled to inject additional capital through a rights offering to support the company's financial stability.

Looking ahead, Ronen Ganon aims to revitalize Multi Retail by leveraging his extensive experience in retail and real estate. His strategy includes enhancing direct imports, optimizing procurement terms, strengthening online operations and data analytics, and improving inventory management. A potential future integration with his Zol Stock chain could create a formidable retail group with combined annual revenues of approximately 1.7 billion shekels and a network of around 155 stores nationwide. Ganon's entrepreneurial background includes significant real estate developments and diverse retail ventures, positioning him to drive the next phase of growth for Multi Retail.